Commitment of Traders Plug-in
In this Track 'n Trade Pro trading training video, I want to talk about the psychology of the small trader or the small speculator in the Commitment of Traders.
We're looking at the July 2004 Orange Juice contract. Now, this contract is coming down off of a very long downtrend. This is contract lows, this is multi, multi, year lows. This market has been coming down forever. Long, long downtrend. Everybody has been predicting, all the way across this thing. Thinking that we're going to hit the bottoms. Let's go through and just quickly and look at some of these indicators. Look at the indicators coming down, picking a bottom here, picking another bottom here, finally picking the bottom here.
Look at the CCI, picking bottoms all the way across the bottoms of this indicator. This indicator, or this trend has been coming down for so long, all the indicators are picking bottoms.
The DMI, very good indicator. Look at that one, picked the bottom perfect, right on the bottom there. This is a very special modification of the DMI indicator that we've put together, you're going to love this DMI indicator. You can see all the way down through that whole downtrend, DMI.
Mac-D, picking bottoms all the way down this trend. The momentum indicator on this market has been so wild. It's up and down and up and down, it's giving you a really difficult time to know from a buy sell stand point what this market has been doing.
The %R, again, trying to pick the bottoms all the way down this trend.
RSI trying to pick the bottoms, all the way down this trend. Here's a Fast Stochastics, Slow Stochastics, trying to pick the bottoms all the way down this trend.
Now, let's look at the commitment of traders. Look at the psychology of the Commitment of Traders. The Commitment of Traders on Orange Juice is primarily driven by the small speculators. Now, look at this, look at the green lines. Those are all the small speculators.
Down this entire trend, through this entire move down- from this point, to this point is about a $5,000.00 move. The small speculators were all buying. They're all going long, every single one. Look at this, they're all buying, they're all going long, down this whole trend. What does that mean? It means that we're losing money. The majority of the small speculators were all losing money down an entire trend of this Orange Juice contract. Why would that be? It's probably because they're listening to indicators like this, that say, buy, buy, buy, buy, all the way down through an indicator. It's because they don't understand the psychology of the indicators themselves either. They haven't studied, they don't know that a CCI channel indicator, just because it gives a buy signal doesn't necessarily mean buy.
Just because you get a buy signal from an indicator doesn't mean you're supposed to buy the market. You need to learn what these indicators are designed for, what the mathematical formulas point out, and what they do. You need to do your studying, you need to do your homework. You need to get Track 'n Trade and you need to go back in time and you need to look. It bothers me when people call me on the phone, and say Lan I just $30,000.00 because I bought Orange Juice because CCI indicator said to. CCI indicator didn't say buy Orange Juice, it said tighten your stops. Watch out, this might be a bottom, that's all it told you. It didn't tell you to buy. Alright?
Look at this, all these little guys are losing money all the way down. Look, the large commercials, as few as there are- look at how small the number of large commercials are trading in this market. Very small number of those blue guys. Remember, the blue guys are the ones you want to follow. These are your big examples, these are the guys who move the markets.
We're going totally opposite of what the blue guys, even though there are very few of them in there, we're going the opposite, we're going the wrong direction.
All these green guys are buying, while all the large commercials are selling. They're all going short. They probably all got in the short market, way back here. Look at this, this is where they got in short. They got in short clear back here. They sold all the contracts they want to sell, they don't want to buy anymore. They're not selling anymore, they're in the market. They're going short, and then they're staying short. They're staying short, all the way through here, and they're staying short, they're staying short, oh, but what are we doing? Little green guys, that's the speculators, we're buying, buying oh, give me more, give me more, I want to buy, give me more, I want to buy, buy, buy, buy! My CCI indicator says to buy my CCI indicator said to buy. Now I'm losing money down this entire trend. For the last 6 months of the year, I've been losing money because I've been going against, I've been bucking the trend of the blue guys of the large commercials. Don't do it.